Latest data shows solar installations to surge across the globe : Renew Economy
58 GW of solar was added globally, bringing total cumulative installations to 236 GW. This is a 32.5% increase in cumulative installations.
IHS is forecasting 67 GW for 2016. I think this is too small. First off, they are attempting to forecast from the demand side, not the supply side. My view is that global solar is supply constrained. What gets manufactured will be installed. It's just a matter of finding the clearing price. The solar industry has been growing supply about 30% per year for decades. And last year it grew 32.5%. So my view is that cumulative installations will grow 30% to 34% on a base of 236 GW. So this is a range of 71 to 80 GW for 2016. IHS forecasts 67 GW, which seems tepid to me.
Another driver here is the emergence of batteries. On the demand side, reliable, moderate cost batteries will make solar more attractive for many applications. It also mitigate policy risks and barriers. I believe this will accelerate solar growth globally. But to my first point about solar being supply constrained, the critical issue is whether solar manufacturers are willing to accelerate capacity expansion in anticipation of battery aided demand. My expectation is that this is the case. For a fact we know that SolarEdge is ramping up production of inverters optimized for Powerwalls. We also know that SolarCity is ramping up 1 GW/y panel capacity to pair with batteries. It takes multiple years to bring new capacity on line, so it seems to me that the anticipation of batteries is boosting supplier confidence even now. So this is how I get to 32% to 34% growth potential for 2016. But this driver clearly depends on how well batteries do in the market. So 2016 will be an important year to see how consumers warm up to Powerwalls and its competitors. If this is strong, then I would expect cumulative solar to grow 33% to 36% in 2017. IHS is forecasting 71.5 GW on a base of 303 GW, 23.6% growth.
In sum, IHS sees cumulative solar growing from a base of 236 GW in 2015 to 303 GW and 374.5 GW in 2016 and 2017 respectively. I see solar going to 309 GW and 411 GW, respectively. A more conservative scenario based on 30% grow gets to 307 GW and 399 GW. I do think that IHS is being overly pessimistic.
To their credit, they had forecasted 59 GW in 2015, while most were predicting 55 GW. IEA failed miserably with a forecast of 38 GW. So IHS is probably one of the best forecasters of solar, but I suspect they are missing emerging demand that will snap up hardware on any softness in prices and the boost that batteries will bring to the market.
FWIW the IEA predicts that solar will hit 400 GW by 2020. I think it will get to that level by end of 2017. The fossil fuel industry loves the IEA forecasts because they suggest long lasting demand for fossils. It is hard to know what a "conservative" forecast should even mean. The IEA puts out a very optimistic forecast for fossil fuels and pessimistic forecast for renewables. These biases imply very serious economic consequences if proven wrong. These biases are part of why all fossil fuels are in a massive glut right now, why there were years of over investment in fossil supply for demand that never materialized. Bad forecasts lead to bad investments. So if IEA truly wanted an economically conservative forecast, they need to route out their bias against renewables and energy efficiency. Both are driven by technology, are driven by cost savings, and have the potential to undermine investments in fossil fuels. If solar misses it's forecasted demand by 1% in a year, it would have practically no impact on the economy. But if oil misses 1% of forecast, it is an economic disaster, a glut that takes years to resolve. So a conservative forecast really ought to stress test soft demand for fossil fuels. Conversely if supply for fossils prove tight, then energy prices go up. This triggers hypergrowth in renewables and EVs. This is not nearly as bad for the global economy as a fossil fuel glut. Indeed, if it is not too extreme, say oil over $115/b, then it may actually benefit the global economy. So the IEA really has their biases pointing in the wrong direction.
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Could someone tell me if the below chart pattern is warranted?
There is a huge gap traders may want to fill. This may be the last hope of some shorts.
